From its company-owned natural spring in northern Ontario, Fountain Springs Inc. bottles and distributes mineral water worldwide. Fountain Springs markets its product in 1-litre disposable plastic bottles and in 16-litre reusable plastic containers.

Required

1. For the year 2016, Fountain Springs marketing managers project monthly sales of 520,000 1-litre and 185,000 16-litre units. Average selling prices are estimated at $0.50 per 1-litre unit and $7.00 per 16-litre unit. Prepare a revenue budget for Fountain Springs Inc. for the year ending December 31, 2016.

2. Fountain Springs begins 2016 with 1,275,000 1-litre units in inventory (that is, beginning inventory). The VP of operations requests that 1-litre ending inventory on December 31, 2016, be no fewer than 976,000 units. Based on sales projections as budgeted above, what is the minimum number of 1-litre units Fountain Springs must produce during 2016?

3. The VP of operations requests that ending inventory of 16-litre units on December 31, 2016, be 265,000 units. If the production budget calls for Fountain Springs to produce 2,090,000 16-litre units during 2016, what is the beginning inventory of 16-litre units on January 1, 2016?